From G-5 to G-77: International

From G-5 to G-77: international

Michael P. Blackwell Economist, IMF Treasurer's Department

Ihhee International Monetary Fund is rec- of mutual problems was found to be useful communique should contain a statement to ognized by its members as the principal forum and worthy of repetition. Since then the Group the effect that, in future, the Group of 7 for the discussion of international monetary of 5—as it soon became known—has met on Finance Ministers should "work together more issues. As Article I (i) of the Articles of numerous occasions, often in conjunction with closely and more frequently in the periods Agreement states, one of the Fund's purposes the Fund's Annual Meetings and the Interim between the annual summit meetings," and is "to promote international monetary coop- Committee meetings. The Group also meets a request that the Group of 5 should invite eration through a permanent institution which on other occasions, particularly when there ministers from Canada and Italy to join its provides the machinery for consultation and seem to be pressing problems in need of meetings "whenever the management or the collaboration on international monetary prob- solution; a recent example is the meeting of improvement of the international monetary lems." Many members, however, also find it September 1985, when the five ministers met system and related economic policy measures useful to discuss such issues in other inter- in New York and agreed to cooperate more are to be discussed and dealt with." The national forums and, particularly in recent closely to achieve some further decline in the heads of state or government also reaffirmed years, in those smaller and less formal inter- exchange value of the dollar. at this time an undertaking made at the 1982 governmental groups which are usually iden- The Group agreed in 1975 that it would be summit in Versailles that they would coop- tified only by the number of their original useful to hold a more formal meeting or erate with the IMF in strengthening multilat- participants. These groups, which range in summit where their heads of government or eral surveillance, particularly among G-5 size from the Group of 5 to the Group of 77, state could come together to discuss the countries. They stated that such surveillance generally function without the benefit of per- difficult international economic situation then would be undertaken in conjunction with the manent secretariats, staff, or offices. They prevailing. It was agreed that for the summit Managing Director of the IMF and identified bring together countries with broadly similar meeting, held in Rambouillet in 1975, the a number of economic indicators that they economic interests and often meet with a Group should be extended to include Italy. felt should be taken into consideration. view to coordinating positions ahead of meet- At the second summit, held the following The Group of 10 is the name that was ings of the IMF Interim Committee, the year in Puerto Rico, the five were joined by given to the ten major industrial countries Development Committee, or other formal both Italy and Canada and the Group of 7 (two of which—Germany and Sweden—were intergovernmental institutions. was born. This appellation has been main- officially represented by their central banks), The prominence given to the debate about tained even though the summit meetings, which established the General Arrangements the relative roles of the Group of 5 and the which have been convened annually ever to Borrow with the Fund in 1962. Through Group of 7 at the Tokyo Summit in May 1986 since, are now also attended by the President these arrangements the ten participant coun- provided evidence of the importance attrib- of the European Community Council of Min- tries agreed to stand ready to make loans to uted to such groups in the consideration of isters, whenever that post is held by a country the Fund in their own currencies when the international economic and monetary issues. that is not a regular member of the Group of Fund required supplementary resources to This note identifies the members of the more 7, and by the President of the Commission be used in forestalling or coping with an important of these groups and briefly de- of the European Community. impairment of the international monetary sys- scribes their history and present role. From 1975 to 1986 the Group of 5 and the tem. In addition to the G-7 countries, this The Group of 5 is the term that has come Group of 7 met as two virtually separate Group included Belgium, the Netherlands, to be affixed to the meetings of the Finance entities. The Group of 5 met informally and and Sweden. After having been associated Ministers and Central Bank Governors of confidentially, while the Group of 7 met amid with the GAB since 1964, Switzerland joined France, the Federal Republic of Germany, considerable publicity and produced widely as a participant in 1983, becoming the elev- Japan, the United Kingdom, and the United quoted communiques. However, the apparent enth member of the Group of 10. Although States. The Group's first meeting was in 1967 success of the Group of 5 in bringing about some references to a Group of 11 appeared when, under the initiative of the US Treasury a decline in the exchange value of the dollar, in the press at that time, the Group continues Secretary and the UK Chancellor of the following their September 1985 meeting, led to be known as the Group of 10. The Group Exchequer, the finance ministers from the to calls for the work of that Group to be has no staff, but secretariat services are five countries came together at Chequers— opened up to other major powers—notably provided by one staff member each from the the UK Prime Minister's country residence— to those participating in the Group of 7 or in IMF, the Bank for International Settlements, for an informal discussion of international the Group of 10 (see below). This question and the Organization for Economic Cooper- monetary flows and of how to hold down was discussed at the 1986 summit meeting ation and Development. The Group convenes interest rates. This collective consideration in Tokyo, and it was agreed that the summit meetings not only to consider any activation

40 Finance & Development I December 1986

of the GAB but more frequently to discuss growing influence of the Group of 10 in the and, infrequently, on other occasions as well. important matters relating to the international formulation of international monetary policy. Meetings of the Ministers are usually pre- monetary system. Meetings on general mon- In the Declaration of Lima in 1971, they ceded by meetings of their Deputies. etary issues are often held at both Deputy stated that it was entirely unacceptable that The Managing Director of the IMF and the and Ministerial levels immediately prior to "vital decisions for the future of the interna- IMF Interim Committee Meetings, and may tional monetary system which are of concern President of the World Bank generally attend be held at other times during the year. The to the entire world community are sought to the Ministerial meetings and are represented Managing Director of the IMF generally at- be taken by a limited group of countries by senior staff members at meetings of the tends the ministerial meetings and is usually outside the framework of [the International Deputies. Officials from various international represented by senior staff at the Deputies' Monetary Fund]." agencies can attend as observers, as can meetings. The press communiques issued at representatives of the Group of 77 countries the conclusion of the meetings of the G-10 In the following year in Geneva, the Group that are not members of the Group of 24. Ministers serve to draw attention to the major of 77 established the Group of 24 as a China, which is not a member of the Group industrial countries' views on outstanding specialized body which would be able to of 77, attends Group of 24 meetings as an international economic issues. address international monetary questions in "invitee." During 1984-86 the Deputies met quite a specific, detailed, and informed manner. The Group of 24 was given the specific In its early years, the work of the Group frequently, among other things, to prepare a of 24 consisted largely of preparing developing report on "The Functioning of the Interna- mandate to study international monetary and financial policies and problems and to suggest country positions for the Committee of 20— tional Monetary System" that was discussed the "Ad Hoc Committee of the Board of by the Ministers of the Group of 10 and means of coordinating joint actions. Since the Group of 24 has assumed these roles the Governors on Reform of the International subsequently at the Interim Committee Meet- Monetary System and Related Issues," which ing of April 1986. Group of 77 has not discussed monetary affairs in a very detailed manner—the main had been established in the aftermath of the The Group of 77 has its origins in the breakdown of the Bretton Woods par value "Caucus of 75" developing countries that met exception to this being its 1979 meeting in Belgrade, when the "Outline for a Program system with the mandate to propose plans to prepare for UNCTAD I, the first United for reconstruction of the international mon- Nations Conference on Trade and Develop- of Action on International Monetary Reform" was launched. etary system. In 1974, with the demise of ment, in Geneva in 1964. After UNCTAD I the Committee of 20 and the establishment the caucus, having grown to 77 members, The Group of 24 is made up of eight of the Interim Committee and Development evaluated the work of the conference in a participants from each of the continents of Committee, the Group extended its focus of "Joint Declaration of 77 Developing Coun- Africa, the Americas, and Europe/Asia. The concern and began to address development tries." From that time on, the Group has participants from Africa are: Algeria, Egypt, as well as monetary questions. continued to function as a caucus for the Ethiopia, Gabon, Ghana, Cote d'lvoire, Ni- developing countries on economic and political geria, and Zaire; from the Americas: Argen- Meetings of the Ministers of the Group of matters before various UN bodies. By mid- tina, Brazil, Colombia, Guatemala, Mexico, 24 issue press communiques that summarize 1986, its membership had risen to 127, ac- Peru, Trinidad and Tobago, and Venezuela; the views of its members and provide a counting for almost all the developing-country and from Europe/Asia: India, the Islamic backdrop to the discussions to be held at the members of the United Nations. Republic of Iran, Lebanon, Pakistan, the Interim and the Development Committees. In its early years the Group of 77 provided Philippines, Sri Lanka, Syria, and Yugoslavia. Also like the Group of 10, the Group of 24 the developing countries with an important occasionally drafts detailed policy recommen- forum for the discussion of international mon- The Group's work is led by a Chairman dations that are officially submitted for the etary affairs; for example, the Group's "Charter and two Vice-Chairmen, one from each re- consideration of these two committees. The of Algiers," drawn up in October 1967, con- gional grouping. The Chairmanship is rotated most notable examples are the "Outline for tained important sections on external indebt- each year. Secretariat support is provided by a Program of Action on International Mone- edness, supplementary financing, the com- the Fund and assistance with research and tary Reform" in 1979, and "The Functioning pensatory financing facility, and other Fund- coordination is provided by UNCTAD and and Improvement of the International Mon- related matters. By the turn of the decade, UNDP. Meetings are generally convened etary System," completed in 1985 and dis- Group members were becoming increasingly immediately prior to meetings of the Interim cussed at the Interim Committee Meeting of concerned at what they perceived as the Committee and the Development Committee April 1986. ED

Finance & Development I December 1986 41